Last chance for small businesses to have their say on money saving energy reforms

Small business owners are being invited to give their views on proposals to reform the way retail energy brokers operate.

Energy regulator Ofgem’s Microbusiness Strategic Review aims to address the bad practice of some brokers, which is estimated to cost small businesses up to £2 billion a year.

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Small business are overpaying for energy

Ofgem says too many small businesses are suffering from a lack of transparency and poor sales practices when they work with energy brokers. As a result, they often end up overpaying for energy.

For example, bad service from brokers can lead to small businesses paying thousands of pounds in commission fees, or being locked into a long-term contract that’s poor value for money.

An initial consultation on reforming the way brokers work with small businesses took place in 2020. After a series of reviews, stakeholder workshops, and data gathering, a new consultation launched on 1 June 2021.

However, small business owners don’t have long to give their views as it closes on 9 July 2021.

What are the energy reform proposals?

Ofgem’s final package of proposals covers six key points:

• clearer contract terms – making sure small business owners receive key information before and after they sign an agreement
• improving transparency – making sure the brokerage costs on contracts are clear
• introducing dispute resolution – energy suppliers will only be allowed to work with brokers that are signed up to an alternative dispute resolution scheme
• a new ‘cooling-off’ period – energy contracts will include a 14-day cooling-off period, meaning small business owners will have the opportunity to cancel an agreement
• a ban on notification requirements – small businesses won’t need to give notice if they want to switch energy supplier
• improving awareness – small businesses will have access to guidance from Citizens Advice, which will increase their awareness of how the market works and their rights

How could these reforms benefit your small business?

If these proposals are introduced, there’ll be a range of benefits for small business owners.

Firstly, you could save money on your energy bills through lower broker commission fees and contracts which are better value for money. The new rules could also make it easier to switch suppliers and get a better deal.

There’ll be more information and guidance available to small business owners, making it easier to understand energy contracts, including the fees and terms involved.

Finally, some of the proposals will increase regulation of energy brokers and suppliers, meaning they’ll need to be more transparent and more accountable for their actions.

As a small business owner taking out an energy contract, you’ll have more information about the contract you’re about to sign, increased transparency over broker fees, and more time to make your final decision.

During the term of the energy contract, you’ll have better access to impartial dispute resolution if you have a problem with your supplier.

Could more be done on the ‘harsh’ debt recovery process?

Citizens Advice says the proposals are a ‘real step forward’ and will provide ‘important new protections’ for small businesses.

However, according to the organisation's Head of Energy Policy, Gillian Cooper, more needs to be done to reform ‘harsh’ debt recovery practices.

With many small businesses still dealing with the financial impact of the pandemic, aggressive debt recovery from brokers and energy suppliers could leave them in an even more difficult position.

The charity adds that small businesses need to be protected from losing money if their energy supply fails.

Cooper said: “It’s vital that Ofgem and suppliers continue to improve support for those who are struggling with their bills, and work with microbusinesses to minimise the risk of disconnection.”

How can you respond – and what happens next?

The consultation invites responses from all small businesses and closes on 9 July 2021. You can submit your response to [email protected].

Ofgem’s published the full consultation document and the draft impact assessment on their website.

Ofgem says that once the consultation responses have been reviewed, it will issue a final decision on its plans for reform this summer. Policy measures are then expected to take effect from autumn 2021 onwards.

Have you had a bad experience of working with an energy broker? Let us know in the comments below.